US Mars Promising Picture for 2017 Grain Harvests – UN

(Agrimoney) – The United Nations flagged promising signs for grain harvests next year, even as it lifted, again, expectations for output in 2016-17, upgrading its inventory estimate to a fresh record high.

The UN food agency, the Food and Agriculture Organization, said that in the European Union, the world’s top wheat producer, the winter crop, to be harvested in 20-17, was “being sown under generally favourable conditions”.

Indeed, recent weather was expected “to benefit early crop development”.

Meanwhile, in Russia and Ukraine, “the sowing pace is ahead of last year’s despite some unfavourable weather, and early projections point to a likely expansion in plantings”, the FAO said.

And in the southern hemisphere, where growers are planting corn for harvest early next year, the agency said that “overall conducive weather… [is] benefiting early crop development”, with high prices are expected to lift area in both Argentina and Brazil.

In South Africa, “early prospects for the 2017 corn crop indicate a production rebound from the drought-reduced 2016 harvest, under expectations that favourable price and rainfall prospects would boost both plantings and yields

‘Not really enough’

The one area where the FAO identified cause for caution was the US, where “low price prospects and a subdued export outlook due to a stronger US dollar are likely to result in a reduction in area planted.

“Dry conditions have also affected parts of the central and southern states,” raising some concerns over early crop establishment, a factor which has indeed begun to attract continued market comment.

Separately, Terry Reilly at broker Futures International said that “traders should continue to monitor the warm and dry conditions across US hard red winter wheat country,” in the central and southern Plains, as well as “drought conditions across Delta states”, which grow soft red winter wheat.

At Commonwealth Bank of Australia, Tobin Gorey said that “US hard red winter wheat region saw a little rain on Monday, but not really enough to make a sustained rise in the moisture needle.

“Forecasters continue to expect dry conditions in these dry regions.”

‘Record stocks’

The FAO’s comments came as it raised further its estimate for the world cereals harvest in 2016-17, by 1.8m tonnes to a record 2.571bn tonnes, reflecting increased expectations for wheat output.

The wheat revision reflected “increases in the Russian Federation’s output – now anticipated at a new record – and in Kazakhstan, where favourable weather boosted yield prospects”.

And, with the barley production estimate raised too, these upgrades “more than compensated for a 4.8m-tonne cut in the 2016 global corn crop, mostly as a result of weather-induced yield downgrades for Brazil, China, the EU and the US”, the agency said.

The estimate for world grain inventories at the close of 2016-17 was lifted by 1.1m tonnes to 25.3m tonnes, “a new record”, albeit when compared with consumption – to form the stocks-to-use ratio key which is a key pricing indicator – well below highs set some 30 years ago.

“Based on the latest forecasts, the world cereal stocks-to-use ratio in 2016-17 would stand at 25.3%, well above the historic low of 20.5% registered in 2007-08, but substantially lower than the record 35.6% registered… in 1986-87,” the FAO said.

‘Tightening supplies’

The agency flagged that cereal prices had risen 1.0% last month despite the robust supply outlook, with the increase a reflection of the low average quality of the world’s huge wheat harvest.

Grain prices had been “buoyed by tightening supplies of higher-quality wheat, even as the overall prospects for global wheat harvest have improved”, the agency said.

Overall food prices rose by 0.7% last month, helped by a 3.4% jump in sugar values, “amid reports of production shortfalls in Brazil’s Centre South region and India’s Maharashtra state.

“Reports of a production shortfall in India… will require imports by the country to meet demand helped to lift sugar prices.”

‘Price surge’

Dairy values soared 3.9% month on month to their highest in 19 months, and extending to 43% their recovery from a March low.

“Quotations rose for all dairy products, in particular butter which was bolstered by reduced stocks and sustained internal demand in the European Union, combined with a rise in buying interest by importing countries,” the agency said, also flagging ideas of declining production.

“Falling month-on-month milk production in the EU and lower output in Oceania have raised expectations of a likely forthcoming tightening in export supplies and fuelled a price surge in recent months.”